Registering your first business: Everything you need to know
Setting up a new business can seem daunting, but it doesn’t have to be. This handy guide will walk you through everything you need to know to register your business with the minimum of fuss.
Registering your business
The first thing you need to do is decide on the legal structure of your business. You can choose to be a sole trader, limited company or partnership, for example.
A sole trader runs their own business and is self-employed. You should register as a sole trader if you’re the only person who owns your business.
A sole trader is responsible for any profits and any losses in the business. You’ll have unlimited liability, which means you’re personally responsible for any debt your business accrues. If your business cannot afford to pay back its debts then you will be personally at risk!
You must register with HMRC as a sole trader within three months of trading and if you have earned over £1,000 in sales from self-employment. You can register online and once registered you’ll will be sent out a Unique Tax Reference (UTR) by post – you must keep this safe!
Once registered as a sole trader, you must also file a tax return every year. This can be done through Self Assessment or you could use an accountant.
To register as a sole trader:
- Choose the name you want to trade under (you can trademark this so others can’t trade under the same name).
- Check how to keep your financial records including sales, expenses and bank statements.
- Register with HMRC for tax and for Self Assessment.
Private Limited Companies
Limited companies are ‘limited by shares’. With a limited company you have corporate responsibilities and are governed by the companies act. You will become a director and/or shareholder, however, the company is its own legal entity.
Prior to registering your business as a limited company, you must:
- Establish your company name.
- Select company directors and, if needed, a company secretary.
- Have at least one shareholder who can also be a director and choose who has control over your business.
- Prepare a ‘memorandum of association’ and ‘articles of association’.
- Be prepared to keep company and accounting records.
You must also register for Corporation Tax with HMRC. We recommend you seek advice from an accountant who will prepare and submit financial records on behalf of the company.
In layman’s terms, a partnership is a way for two or more people to run a business together. So, if you’re in a partnership, the responsibilities, including profits or losses that come along with running the business are shared between the partners. Partners share the business’ profits, and individual partners pay tax on their own share.
If considering a partnership we would recommend a partnership agreement from the outset.
To set up a partnership, you need to choose a name for your business, have a ‘nominated partner’ (responsible for managing the partnership’s tax returns and keeping records), and must register with HMRC.
Once you have chosen your business partnership name you might consider registering it as a trademark to prevent others from using it.
Registering your business
Whether you’re setting up as a Sole Trader, Limited Company, or a Partnership, there’s a few things you need to keep in mind if you’ll be running your business from home.
If you run your business from home:
- You need to ensure you have permission from your mortgage provider or landlord to run a business from your home address.
- You may want to consider business insurance, as your home insurance may not cover your business equipment and assets.
- You can include business costs and overheads in your Self Assessment tax return (as a sole trader or as part of a partnership).
- You will need to be responsible for health and safety.
When you first set up a business, you need to make sure you register it correctly. Follow the steps we’ve outlined in this guide (and seek professional advice) and you’re sure to get up and running with the minimum of fuss.
If you’d like help growing your new business and you’re based in County Durham, make sure to apply to be part of the next DCI cohort.